INSURANCE: Trustee of trust which owned house damaged by fire not liable to gratuitous tenants for failure to insure or expedite repairs… Lynch/Molloy.
In 6/11 a fire damaged a house belonging to a trust of which Walter Wilmerding is trustee. Residents Theresa and Leah Joseph sued Wilmerding claiming he wrongfully failed to purchase homeowner’s insurance and did not timely repair the house after the fire. They asserted negligence (Count I), breach of contract (Count II), breach of the implied covenant (Count III), NIED (Count IV), IIED (Count V), and punitives (Count VI). Wilmerding moved for summary judgment on all counts except I. Magistrate Lynch recommends summary judgment as to II-V but denying it as to VI, largely because Wilmerding did not request summary judgment on the negligence claim. A review of Lynch’s findings & recommendation strongly suggested that Josephs’ negligence claim would fail because Wilmerding did not owe a duty to them. Wilmerding was invited to move for summary judgment on the absence of duty. A hearing on the motion took place 7/3. The motion for summary judgment is granted and, as a corollary, summary judgment is also granted as to the punitives claim.
Count II (breach of contract). Even assuming that Josephs had an implied contract with Wilmerding, he did not breach that contract. Any implied contract did not require him to purchase homeowner’s insurance, nor was he required to repair the house after the fire. Josephs are not entitled to relief under promissory estoppel. They did not make this claim in their complaint, the deadline for amending has passed, Rule 16(b), and they have not explained why they were unable to timely amend.
Count III (breach of the implied covenant). This fails because it is identical to the breach of contract claim — that Wilmerding failed to purchase insurance and repair the house.
Counts IV and V (NIED and IIED). Josephs were never treated for any emotional distress, and have failed to show that the alleged distress “was the reasonably foreseeable consequence” of any negligent or intentional act or omission by Wilmerding. Sacco (Mont. 1995).
Negligence. Josephs do not argue that Wilmerding owed them a fiduciary duty by virtue of his trustee status. That duty is owed to the trust beneficiaries. MCA 72-34-103; Hofer (Mont. 2005). Montana courts consider, in determining whether a duty exists, whether imposition of a duty comports with public policy and whether the defendant could reasonably have foreseen that his conduct could have resulted in injury to the plaintiff. In weighing policy considerations, they are to consider moral blame, prevention of future harm, burden on the defendant, consequences to the public, and availability & cost of insurance for the risk. Policy considerations weigh against imposing a duty to purchase homeowner’s insurance. Wilmerding allowed Josephs to live at the house rent free, and they essentially took it “as is.” Although every property owner has a duty to exercise “ordinary care or skill in the management of the person’s property,” MCA 27-1-701, there is a difference between making your property safe for others and insuring it in case it is not. Insuring property does not prevent harm that might be caused by its condition (e.g., insurance does not prevent house fires). Property insurance simply indemnifies the owner for that harm. That is not to say that 3rd parties never benefit from property insurance. A plaintiff in a premises liability case generally hopes that the owner has insurance so there is money from which to recover damages. However, the cause of action lies in the dangerous condition, not availability or procurement of insurance. Thus a property owner has no “moral blame” for failing to purchase property insurance which, by design, protects the owner and not 3rd parties. Unlike unsafe property, failure to purchase insurance does not pose a risk to 3rd parties. Failure to purchase insurance simply means that 3rd parties cannot look to insurance as a source from which to recover damages; they must look elsewhere (e.g., the owner’s personal money or property). In the same vein, failure to purchase insurance does not prevent future harm caused by the property’s condition. Fisher (Mont. 2008). It simply protects the property owner in case of future harm. A duty to purchase property insurance would place an expensive burden on owners. (The duty to purchase vehicle insurance is a statutory, not common law, duty, but even so, a suit claiming that failure to buy auto insurance caused damage in an MVA would also be futile.) Wilmerding might have been less likely to gratuitously allow Josephs to live at the house had he been required to insure it. The trust owned the house; there was no secured interest by a lender. While the trust beneficiaries may have claims based on trust law, the gratuitous occupants do not. Policy considerations also weigh against a duty by Wilmerding to more expeditiously repair the home after the fire. The parties have not argued that they had a rental agreement, which might trigger the statutory duty of a landlord to maintain and repair the house. MCA 70-24-303(1)(c). Even without the repairs (which were eventually made), the house was apparently habitable. Wilmerding could have ordered Josephs to leave at any time (setting aside any promissory estoppel or similar arguments), forcing them to leave an otherwise habitable house with nowhere to go instead of making repairs sooner. Few would dispute that greater “moral blame” would attach to that action compared to letting Josephs remain and later making the repairs. My reasoning is not intended to minimize the difficulties Josephs might have faced as a result of the fire, but their suit is analogous to suing someone for giving a bad gift. Assuming that one receiving a gift is not harmed by the gift, there is no legal remedy for receiving a bad gift; the only remedy is to not accept it. West (9th Cir. 1963) (applying Hawaii law and observing that a gratuitous occupant “receives the use of the premises as a gift, and comes under the old saying that you may not look a gift horse in the mouth.”). As to foreseeability, failure to purchase homeowner’s insurance creates a risk for the homeowner, not a 3rd party who has no contractual interest in the home. Even when there is a contractual relationship, such as landlord-tenant, the landlord does not have a common law duty to insure the property for the benefit of the tenant. Josephs were not in the “zone of risk” because Wilmerding’s failure to purchase homeowner’s insurance was not their risk to bear; it was Wilmerding’s risk as the trustee. His failure to timely repair the home arguably creates some risk to Josephs, but it is outweighed by the greater risk that he could have forced them to leave an otherwise habitable home instead of choosing to make the repairs sooner. Moreover, they were not foreseeable plaintiffs because they lived at the house “as is.” Absent an obligation to let them continue living at the house, there was no obligation to expeditiously make repairs for their benefit. Since they have no viable claims for actual damages, they have no claim for punitives. Lynch’s findings & recommendations are adopted in full as to Counts II-V. Summary judgment for Defendants on all counts. Jury trial set for 7/16/12 is vacated.
Joseph v. Wilmerding, 39 MFR 487, 7/9/12.
Johnna Baffa, Joshua Van de Wetering, and Laura Reed (Van de Wetering & Baffa), Missoula, for Josephs; Jeffry Foster & Maxon Davis (Davis, Hatley, Haffeman & Tighe), Great Falls, for Wilmerding.
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